Wednesday, March 13, 2013

The broad US market has been the story thus far in 2013 and Quant’s
upper ranks have highlighted various large cap and small cap funds that have
been among the world’s best performers.
Today we see some mid cap funds getting their turn in the top 10. Today’s 10th place SPDR S&P
MidCap 400 Fund (MDY) got
as high as 9th place last week, its highest rank this year, and the 8th
place iShares S&P MidCap 400 Growth Index Fund (IJK) achieves the top 10 for
the first time in 2013. While new to the
top 10, both funds have been ranking well as they keep pace with the market’s historic melt up.

That rally has kept their technical scores strong at around 70 for
each with plenty of market skepticism also keeping their sentiment scores at
elevated levels. Fundamentally both
score well with IJK’s 72 Fundamental Score beating MDY’s 66.5 even though the
latter is cheaper on most metrics. The
lower score is attributable to MDY’s longer lifespan which includes more data
points to compare against. A look at
each tear sheet differentiates the two.
The higher ranking IJK holds more than half its AUM in info tech,
industrials and consumer discretionary where MDY’s top three sectors see more
than half of AUM in financials, industrials and info tech. So your preference between financials and
consumer discretionary should drive your decision more than 2 places in Quant’s
rankings. IJK gets the higher Green
Diamond Reward Rating of 9.13 but MDY’s 8.87 is very close. The weightings in financials versus consumer
discretionary could account for MDY’s higher Red Diamond Risk Rating of 4.56
compared to IJK’s 4.09. Regular readers
will notice those Risk Ratings are higher than Quant’s recent high rankers and
they have brought the average of the top 10 up to 3.85 which is still low
compared to today’s all equity fund average of 4.58.

Whether the melt up continues or not, Quant says these two funds
will outperform most others in the next few months. Their Behavioral Scores account for their
rise in the ranks which may suggest the market is looking to broaden out to
riskier names. Only time will tell but
we have been waiting for some turnover in the top ranks which have been
remarkably stable since late last year.
We’re glad that stability has been in the sweet spot of the market and
we are on the lookout for the next sector or region that rises in the
ranks. So check in each day for the
latest on what Quant has to say.